Global memory stock sell-off continues, causing turbulence across Asia-Pacific markets. Currently, the South Korean stock market has plummeted dramatically, while Hong Kong stocks have bucked the trend to show independent strength.
South Korea Market in Freefall
On Wednesday, South Korea's stock market experienced yet another circuit breaker trigger, with memory stocks once again being the hardest hit area. In early trading, the Korea Exchange activated a circuit breaker for the KOSDAQ index, suspending trading for 20 minutes. Shortly after, the KOSPI index plunged over 8%, triggering a market-wide circuit breaker that suspended all trading for another 20 minutes.
This marks the ninth market-wide circuit breaker trigger this year and the first time in history that circuit breakers have been triggered on two consecutive days. Since the second half of the year, the frequent and sharp declines in South Korean stocks have made them a "circuit breaker specialist" in global markets.
The "memory chip duo," which dominates half of the South Korean market, have seen significant corrections. Although SK Hynix reported its strongest-ever earnings results, the market remains unimpressed. The Korea Composite Stock Price Index (KOSPI) fell over 12% intraday to break below 5300 points, closing down 5.99% at 5663.08 points, its lowest close since April 7, and retreating nearly 40% from its June high.
Samsung Electronics closed down 5.23% after briefly falling nearly 14%, retreating 44% from its June high. SK Hynix closed down 9.6% post-earnings, after briefly falling nearly 20% to record its largest intraday decline, retreating 53% from its June high. Meanwhile, in the Hong Kong market, the Southern CSOP 2x Hynix ETF plunged over 25% intraday, with a decline of 81% since July. The Southern CSOP 2x Samsung Electronics ETF fell over 17%, with a drop of about 70% this month.
The root cause of South Korea's market collapse lies in the massive high leverage accumulated previously. In an effort to "rescue the market," South Korean regulators are intensifying policy tightening. Yesterday, Lee Bok-hyun, Chairman of South Korea's Financial Services Commission, publicly stated that if existing policies fail to cool the market, new additional regulatory measures will be introduced. Today, he further stated that regulators are reviewing a plan to raise investment requirements for single-stock leveraged products from general investors to professional investors.
On the same day, the South Korean Finance Minister apologized for the introduction of single-stock leveraged ETFs without thorough consideration. "Although we anticipated various side effects when implementing this policy, the original intention of launching this product was to retain investment demand that would otherwise flow overseas and reduce investment risks. If it ultimately triggers other negative impacts, the government should promptly implement remedial measures to improve it." He stated that the current severe market volatility is the result of multiple factors, and leveraged ETFs are not the sole cause. The government is internally studying market stabilization measures, and further adjustments to regulations concerning single-stock leveraged ETFs are possible to address market volatility.
Hong Kong Stocks Stage a Breakthrough?
Amidst the sharp global cooldown in AI hardware trading, a massive capital migration across the global tech sector is underway. In stark contrast to the South Korean stock market, Hong Kong stocks stood out as an "island of one" today. The Hang Seng Tech Index rose over 2%, while the Hang Seng Index and Hang Seng China Enterprises Index both gained over 1%, with large-cap tech stocks seeing a collective surge.
Xiaomi surged over 9% intraday, hitting a new high not seen in nearly two and a half months. Tencent rose over 4%, while Meituan, JD.com, Alibaba, and Baidu all advanced. Currently, as global capital exits the upstream memory sector, it is rapidly seeking new allocation directions.
Capital is fleeing from "shovel sellers" in computing hardware and rotating towards terminal tracks capable of achieving AI commercialization. "Memory ebb, terminal crowning" has become the core theme of market divergence. As the heavily hyped upstream memory chip sector enters its valuation realization phase, SK Hynix and Samsung are weighing on South Korean stocks. Conversely, Hong Kong-listed tech assets, primarily focused on internet platforms, consumer electronics terminals, and AI applications, are gaining significant favor.
Last night's US market sent a clear signal: Apple's market capitalization briefly surpassed $5 trillion intraday, overtaking Nvidia to reclaim the title of the world's most valuable company. Capital is increasingly recognizing the on-device AI business model. Compared to capital-heavy computing hardware manufacturers, downstream terminal leaders that rely on terminal hardware and stable cash flow for lightweight AI implementation have stronger earnings certainty. Today's tech stock rally in Hong Kong, led by Xiaomi's surge, follows the same logic.
However, besides capital migration and industry chain rotation, Hong Kong stocks' independent performance is also the result of multiple factors converging. Compared to South Korean stocks, which are at high valuations and hinge on "memory performance as a key determinant," the Hong Kong tech sector has undergone continuous adjustments previously, placing its valuations at multi-year lows, offering a natural value advantage.
Diversification in sector structure is also a crucial support. Hong Kong stocks aggregate assets like internet platforms, consumer electronics, computing applications, and smart vehicles, avoiding the pure memory manufacturing sector targeted by capital outflows, thus providing ample room for sector rotation. Citigroup has previously downgraded South Korean stocks and upgraded Chinese stocks to "overweight." The bank's analysts have set a year-end target of 29,600 points for the Hang Seng Index and a mid-2027 target of 30,500 points.
Michael Burry, the investor whose story inspired "The Big Short," also indicated that now is a good time for investors to look for undervalued investment opportunities in the Hong Kong stock market.
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